WASHINGTON (AP) — A federal appeals court has allowed the U.S. Education Department to proceed with implementing a plan to reduce monthly payments on millions of student loan borrowers, putting on hold a lower court ruling last week.
The ruling by the 10th U.S. Circuit Court of Appeals puts a central part of President Joe Biden’s efforts to reduce student debt back on track: a rule that lowers the amount some borrowers who qualify for a repayment plan must pay from 10% of disposable income to 5%.
The reduced payment limit was set to take effect July 1, but federal judges in Kansas and Missouri blocked much of the government’s student loan repayment plan in two separate rulings last week. Sunday’s ruling means the agency can continue with the reduced payments it has already calculated while it appeals.
The rulings have created a arduous environment for borrowers, said Persis Yu, deputy executive director of the Student Borrower Protection Center, which works to eliminate student debt. The reprieve granted by the 10th Circuit is short-lived, Yu said, and leaves many borrowers unclear about their future financial obligations.
“Borrowers are currently making decisions about their financial lives and they lack the basic information they need to make informed decisions,” Yu said.
The Biden administration created the SAVE plan last year to replace other existing federal income-driven repayment plans. It allowed many to qualify for lower payments, and debt was forgiven for borrowers who had made payments for at least 10 years and originally borrowed $12,000 or less.
U.S. Education Secretary Miguel Cardona said the Biden administration remains “committed to our work to fix the broken student loan system and make college more affordable for more Americans.”
The appeals court’s ruling has no impact on a federal judge in Missouri’s preliminary injunction prohibiting the Department of Education from forgiving loan balances in the future.
The injunctions are the result of lawsuits filed by Republican-led states seeking to invalidate the Biden administration’s entire debt forgiveness program. The program is set to first be available to borrowers in the summer of 2023, and at least 150,000 borrowers have had their loans forgiven. The suing states argued that the administration’s plan was a workaround after the Supreme Court rejected the original student loan forgiveness plan earlier this year.
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